USD Euribor started to rival BBA Libor

The first USD Euribor was published on 2 April 2012 with a panel of 20 European and international banks, after a 9-month testing period. It was developed by Euribor-EBF and the Euribor Steering Committee following a demand from the market to create a benchmark offering the market the best possible idea of the USD interbank market in Europe. The calculation and publication of the rates is done by Thomson Reuters. This is to rival the BBA Libor.

Every Panel Bank is required to directly input its data no later than 10:45 a.m. (CET) on each. Each Panel Bank is allocated a private page on which to contribute its data. Each private page can only be viewed by the contributing Panel Bank and by Thomson Reuters staff involved in the fixing process. From 10:45 a.m. to 11:00 a.m. (CET) at the latest, the Panel Banks can correct, if necessary, their quotations.

At 11:00 a.m. (CET), Thomson Reuters will process the USD Euribor calculation. Thomson Reuters shall, for each maturity, eliminate the highest and lowest 15% of all the quotes collected. The remaining rates will be averaged and rounded to five decimal places.

All maturities, other than overnight, are quoted for spot value (two US working days) and on an actual / 360 day basis. All market participants shall use the “Modified Following Business Day Convention”, where if the maturity date of a USD Euribor rate falls on a day that is not a “Business Day” the maturity date shall be in the first following day that is a Business Day, unless that day falls in the next calendar month, in which case the maturity date will be the first preceding day that is a Business Day.

Now, it needs to be seen in the future how USD Euribor competes with USD Libor as regards to its acceptability as a benchmark rate. This competition will definitely make both EBF and BBA to maintain the highest standards of governance and internal control necessary to instill confidence among the market players for Euribor and Libor to be used as a benchmark rate. Let us hope that this will bring the days of better pricing ahead.